Why make ourselves poorer by doing unprofitable things?

Profit is a lovely thing. It is, in fact, the whole and entire aim of any form of economic activity. That what is produced by the effort is worth more than the resources used - plus the effort - in making it. This really is the all of it. We want to do things that have added value - that profit - and not do things that do not.

Note that this is entirely different from the capitalist profit - that’s the portion of that value added that the capitalists get. That sort of profit is only of use as an incentive to keep people trying to make the more basic form of value add. Yes, incentives matter and that sort of profit is certainly a motivation for the capitalists. But the distinction is still important. All economic activity needs to be profitable if it’s to be sensible. It is not true - not in the slightest - that all economic activity needs to be capitalist.

The value add also doesn’t need to be monetary it just has to be value. We’re certainly open to the argument that the value of nappies is not just in the money that changes hands but in the existence of dry and smiling babbies. Or even of dry floors.

But the other side of this is that we really do have to pay close attention to not doing those things which subtract from value:

A new “grocery tax” designed to achieve the Government’s net zero targets will push up household shopping bills by up to £1.4 billion a year, The Telegraph can reveal.

Ministers have been accused of “quietly” passing legislation that will see as much as £56 added to household costs annually, according to the Government’s calculations.

The green levy – which will see retailers and manufacturers charged per tonne of packaging materials they use – is aimed at helping the UK to reduce waste and meet its net zero targets.

Recycling is a lovely thing - if it adds value. Using fewer resources is a lovely thing - if that adds value. If there’s an overall cost to both, or either, then that’s not value adding by definition. That this is going to cost that £56 a year per household is simple proof that this is value subtracting - by at least that £56 a year per household.

Therefore, obviously, we shouldn’t do it.

Yes, yes, we know, “reducing waste” is a part of the new religion, that worship of Gaia. As we’ve noted before, it’s been some time since we Britons really insisted upon a State religion that all must adhere to. We do think that that interregnum in between was better than the imposition of either.

Tim Worstall

So, who is going to get jugged here?

We agree, again, with Marina Hyde here:

I don’t think it is an exaggeration to state that the health of our dangerously unwell society depends on this kind of justice being served. The repeated failure to bring big people to justice for ruining little people’s lives – and the unexpected shockwaves that flow from those failures – may turn out to be the defining story of the first half of the 21st century.

As we’ve said before:

We have been less than happy - and said so - over the years about the Post Office’s Horizon scandal. The original mistake was of such mindnumbing stupidity that it’s difficult to believe a system containing actual live, capable of breathing, human beings made it. The smokeblowing and backfilling over it were worse. So much so that one of us has, in another place, called for substantial punishment:

There’s plenty of blame to go around over the Horizon computer and accounting program and we might include parts of the Post Office management, Fujitsu the contractor and others. But Byng’s historic example shows that the right response is simple. In fact, why not go further back than Byng and go Viking on the guilty?

One of us has also - not wholly jocularly - suggested that we simply jail everyone and see who can argue their way out. Something that Ms. Hyde has noted at one point.

This is, to us, very much more than simply that some got hard done by. We regard this as akin to - note the “akin” - a crime against the very system.

By analogy - again note the “analogy” - we punish, very severely, the crimes of perjury and contempt of court. Not because lying is an unexpected part of life, nor because holding lawyers in contempt is unusual. But because those two are crimes against the very system. The rule of law simply does not work if people will not take it seriously. And we’d all really not like it at all if the rule of law did not hold sway.

Which is the analogy here. Error in a computer program? This is hardly unexpected, tho’ again as we’ve noted the idiocy of the mistake in the first place is hard to believe. But what then followed? We do regard that smokeblowing and backfilling as being akin to a crime in itself - again, note the “akin”.

So, who is going to get punished, how and when? We’re already a decade late on that last. The answers to the other two should be, to our mind, many and lots.

No, it’s not just for the postmasters. It’s because if we don’t go Viking on those who break the system then more will do so in the future. The inverse of that old English wisdom that once you pay the Danegeld you never get rid of the Dane. It took us some centuries to learn that lesson as a nation - let’s not forget it now.

Tim Worstall

Improving education

Elon Musk, heading up the US Department of Government Efficiency, has promised, some would say threatened, to close down the US Department of Education. He argues that it achieves nothing worthwhile, and stifles state and school independence, forcing compliance with goals that do not represent the interests of parents and pupils. It employs bureaucrats, most of whom have no experience of teaching, and who consume federal funds without producing anything of value to education.

 It is a bold approach, and might cause us on this side of the Atlantic to watch carefully to see if it is an approach we might learn from. At the very least it could cause us to examine in detail just what the UK Department for Education actually does.

Closing down the UK Department for Education would devolve power downwards to schools and parents. With more and more free schools and academies, this would accelerate the process by which decisions would bemade locally rather than nationally. Given that different areas have different educational needs, it would allow for more variation and innovation. It could accelerate the process under which schools could establish specialities such as music or mathematics.

The closing of such a large department would free up funds that could be allocated directly to schools and teachers. Its closure would free up educators to concentrate on teaching rather than the huge workload of form-filing and compliance presently required.

It would make schools accountable to parents and communities rather than to remote bureaucrats, enabling them to adapt to the specific needs of students. It would create space for innovation, giving schools the freedom to test novel teaching methods and varied curricula.

Improvement would occur because of the greater competition between schools to attract students and the funds that would accompany them. Parents would have more choices, and schools they favoured would inspire others to copy their success. Top-down initiatives from the DfE would be replaced by local initiatives, with decisions made by those with knowledge of local conditions.

Teachers would gain greater autonomy, improving both morale in the profession as well as achieving better results.

Perhaps the biggest gain would be the distancing of education from political agendas imposed by those seeking to use education as an instrument for social change rather than the acquisition of knowledge and skills that parents would prefer it to pursue.

 For the things that still need to be done centrally, the use of outside agencies under contract might give greater control and flexibility that the use of in-house staff.

Given the likely impact of such a move, it will come as no surprise if people in the UK start looking closely at Elon Musk’s initiative and calculating how it, or at least parts of it, might be implemented here.

Why is it that truths are the most shrieked about?

This is certainly impolitic from Elon Musk. It’s also rather broadbrush and so not wholly, 100% and exactly true. But there is still a great deal of truth to it:

Musk’s new obsessions (beyond the validation and human affection that he mistakenly believes he will find on social media) are attacking public servants, slashing social spending and going after the most vulnerable. “In most cases, the word ‘homeless’ is a lie,” Musk tweeted recently. “It’s usually a propaganda word for violent drug addicts with severe mental illness.”

Homeless has a different meaning over in the US. It’s not that claim from Shelter - the 300,000 homeless in this country - which is not about people rough sleeping at all. That’s about those in housing that Shelter thinks should be better. In the US homeless does rather mean sleeping in a tent on the pavement.

But, as here, those who are that sort of homeless - rough sleeping - are preponderantly those with one or more mental health or addiction problems. Those who are simply without housing tend to, as here, get picked up by the varied services designed to do so. There’s a transience to being homeless through housing problems that is. The long term version is not, in fact, something about housing at all.

It’s about the closure of the asylums perhaps - tho’ that is also a fairly brutal way to put it and again a version that is not wholly and exactly true.

But the thing we’d really like to know. Why is it that the things which cause the most shrieking over at The Guardian are the things that are - largely and usefully - true?

Tim Worstall

How to Deregulate

Elon Must is one of many coming into political office pledging to cut red tape and make regulation simpler and lighter. Few manage to do it because every regulation has its vociferous supporters. Many big established companies support regulation in their sector because the costs of compliance inhibit new market entrants. They are big enough to support it but the new upstarts who might complete with them cannot.

Furthermore, regulations appeal to those cautious enough to want everything to be proven safe before it can be allowed. The EU is notorious for embracing the precautionary principle, banning GM foods and even internal gene editing using CRISPR technology, despite no evidence of harm to humans and with huge potential benefits.

Anyone starting a new business has to comply with thousands of pages of regulations. House builders have to comply in minute detail with stacks of regulations constituting a pile several feet high.

There is a way to do it which goes along with the grain of English Common Law, but against that of the Stature-driven Continental law. It is to establish standards by broad directives that are then later detailed by the decisions of judging bodies.

For example, instead of the many pages detailing the toilet facilities that employers have to provide for their employees, the requirement might be imposed upon employers to provide adequate and decent toilet facilities. The critics might pounce, asking what counts as adequate and decent, and the answer is that this would rapidly be established by a series of decisions by courts and tribunals, building up a body of precedent in the way Common Law works in England. Very soon employers would know what they had to do.

By using Common Law precedent to build up regulations instead of trying to put in writing at the start the detailed requirements, the regulations would be made simpler and more flexible. It would also free up businesses to build up markets and create wealth instead of spending a large part of their time in form-filling and excessively detailed compliance.

Knowledge of Elon Musk and his record suggests that he might just be the one to succeed where thousands have failed in cutting out the wastage of excessive regulation and detailed compliance. If someone manages to draw his attention to this article, he will know how to do it.

Bit of a blow to the degrowth fantasists

Larry Elliott talks about the failure of the European Union economy. We think he gets the problem wrong. Sure, the one single monetary policy for disparate economies, without that central fiscal redistribution, never really was going to work. Some of us have been saying that since first discovering this ‘ere internet thing (the archives of sci.econ still exist somewhere out there). But the actual problem is that the EU tries to Mazzucato new industries. Control, regulate and plan them from the centre. That’s just something that doesn’t work.

But that’s all obvious. This we think is more interesting:

Stagnant living standards mean unhappy voters

Whatever is true about the climate, the environment, precious Gaia and so on. Whatever is true in the minds of degrowth fantasists. Wherever we are in the doughnut economy and however philosophically correct limitarianism is. When it comes to Hom sap, us ‘umans out here, no economic growth makes us unhappy.

This is rather connected to the Easterlin Paradox, that those in richer countries seem - past a certain point - no happier than those in poorer. That Easterlin effect does rather fade away if we use log scales, true. But our contention (a contention is something weaker than a claim, something that’s a useful working assumption that is until more work has been done on it) is that it is continued economic growth that makes people happier.

Two and three percent a year real growth is what makes for happy, shiney, people. We don’t, not particularly, note that each year. But over the decades of a lifetime it becomes entirely obvious that things are getting better. Which makes for those happy, shiney, people - the children will have a better life than the parents.

That is, it’s not the state of having grown that produces human happiness, it’s the observation that growth is happening which does.

As we say that’s a contention. But we do think it’s a useful working assumption - a standard analysis of our own UK politics these days is that folk are more than a bit grumpy given the lack of sustained growth in recent decades, yes?

From which a lesson. Degrowth just isn’t going to work, not in a democracy. Oh, and, obviously, don’t try to Mazzucato those new industries and technologies that produce the happiness enhancing growth. Obviously, don’t do that.

Tim Worstall

Our word, well, fancy that…..

Competition works, does it?

Drill into rail’s latest passenger and financial figures and there is a silver lining for those who believe nationalising trains might deliver more reliability, lower subsidies and fares.

But there is a huge caveat: success will depend on ministers choosing to copy an operating model that has proved to be hugely successful on Britain’s East Coast intercity route for a quarter of a century. This is where three privately owned non-subsidised train companies, known as open access, compete aggressively with the state-run operator.

As we’ve been known to point out it’s not, particularly, ownership that matters. Yes, capitalism works but John Lewis and the Co Op are decidedly socialist - being cooperatives - organisations and you really don’t see us with signs outside them chanting “Capitalism Now!”

It is competition between different suppliers that matters. As here on the East Coast line, as also on the Spanish high speed routes. Yes, obviously, there’s only one set of rails but multiple companies - organisations, we’d not care if one or more was a co-op - can run over them.

It is competition that increases productivity and as Paul Krugman has been known to point out, productivity isn’t everything but in the long run it’s pretty much everything. So, competition in rail services - why not?

Tim Worstall

If it’s so great why do we need a law?

UK Listing Rules dictate that a minimum of 40pc of board seats should be held by women. At least one senior position, such as the chairmanship or chief executive role, should also be held by a woman.

The listings rules work on a comply or explain basis, meaning that companies are not forced to hit the 40pc gender diversity but must explain why they have fallen short if they do.

The argument has been that such diversity increases the profitability of a company. Could be true, certainly - having diversity in management could lead to a greater understanding of the diverse desires of the population and so to making more money. But as with oh so many contentions this is something that might be true, might not be.

The thing being that there’s no actual evidence that it is true. The best we get from the Norwegian experiment is “Furthermore, nothing indicates that the quota policy has negatively affected the running and profitability of firms” and an absence of direct harm is not the most ringing of endorsements.

The recent American experience with Nasdaq is not hugely informative. For the overturning of the insistence is only a court ruling that the exchange doesn’t have the legal power to so insist rather than an evaluation of the effectiveness.

The thing is we really do think that capitalists are greedy. They’d like to increase their profits. So, if gender diversity does so then they’ll do it once they’re apprised of the possibility of improving their profits in that manner. That is, we don’t, in fact, require a law or even a rule. It’ll happen jus’ ‘coz it’s good, see?

Which does have an interesting logical conclusion. Those insisting upon the law, the rule, must be those who think that it does not, in fact, increase profitability. For if they thought it did then they’d not be arguing for a law, would they?

Tim Worstall

A Great Day for World Trade

On Sunday without much fanfare, one of the most monumental days in world trade took place. It generated few headlines, but its effect will be significant and long lasting. The UK became the twelfth member to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (usually abbreviated to the CPTPP).

The UK are now trading partners with Mexico, Japan, Singapore, New Zealand, Canada, Australia, Vietnam, Peru, Malaysia, Chile, and Brunei. We now have privileged access to each other’s markets. The twelve members have combined economies representing 14.4 percent of global gross domestic product, at approximately US$15.8 trillion as of 2024. The CPTPP is thus one of the world's largest free trade areas measured by GDP. There are larger ones, but the crucial significance for the UK is that we have joined a rapidly growing trade area. The EU single market is larger, but it diminishes annually as a percentage of global trade, whereas the CPTPP is growing each year.

Furthermore, it represents a shift in UK trade policy as we look further afield than Europe and toward the growing markets and economies of the East and South. The UK is the first European country to join, and it is able to do so because it is no longer in the EU. The EU single market is not a free trade area, but a Zollverein, a protectionist customs union designed to protect its domestic producers behind a tariff wall that acts to deter outside and cheaper competition.

EU members cannot join because they must obey the EU’s Common External Tariff, whereas the point of the CPTPP is a lowering of tariff barriers to encourage greater trade between its members.

Sunday’s accession to the CPTPP by the UK means that we cannot rejoin the EU or sign a trade deal with them that involves tariffs on goods from our CPTPP partners. 

In joining the CPTPP, the UK has turned away from its past associations and nailed its colours firmly to the mast of the future. Other nations are in the pipeline to join the bloc, which means it will grow even more in size and economic significance. Bravo for Britain, and Bravo for the future of world trade.

Would recycling disposable vapes make us richer?

We’re told that there’s an environmental outrage going on out there:

Thirteen vapes are thrown away every second in the UK – more than a million a day – leading to an “environmental nightmare”, according to research.

There has also been a rise in “big puff” vapes which are bigger and can hold up to 6,000 puffs per vape, with single use vapes averaging 600. Three million of these larger vapes are being bought every week according to the research, commissioned by Material Focus, and conducted by Opinium. 8.2 million vapes are now thrown away or recycled incorrectly every week.

Oh. Gosh.

Material Focus has calculated that the number of vapes thrown away per annum could instead be powering 10,127 electric vehicles.

Our word. That’s the lithium in the vape batteries that could, instead, be used in car batteries.

As we once calculated the Earth’s endowment of lithium is 2,850,000 billion tonnes. With a B. So we’ve no hard shortage of the right type of atoms. It becomes purely a financial consideration therefore.

To a suitable level of accuracy a car battery - an EV - requires about 10 kg of lithium. So, we’re talking 100 tonnes of lithium (10,000 x 10 / 1,000) and each tonne has a cost of about £8,000 for virgin material. We’ve an £800k problem. We’ve also got that 8.2 million a week number, x 52, call that 400 million a year of these disposable vapes - round numbers because don’t be silly about accuracy here.

0.2 pence of lithium per vape therefore. That’s 0.2 pence which has already been paid by the purchaser of the disposable vape of course. The costs are covered already.

But, say, OK, that’s a valuable natural resource that should be recycled. Hmm. Minimum wage in today’s UK is £12 an hour now, close enough. 20 pence a minute or 0.33 pence per second. If that recycling takes more than one second of human time then it’s loss making for us all as a society. Effort, human labour, is being used on something that produces less value than the labour being expended upon it.

There is a little part of this we’re not sure of. We have a feeling that - but don’t know - the recycling process requires moving to “black mass” which then has to be processed as a lithium concentrate, not as lithium. This would move the value of the Li contained another decimal place out - 0.02 pence per vape.

Note that we’re entirely leaving out any transport costs to a factory to do the recycling, the recycling process itself. The process is societally impoverishing if even one second - or, perhaps, one tenth of one second - of human labour has to be expended upon the process.

We’re all in favour of recycling. One of us once recycled a few lorry loads of Soviet nuclear power station scrap into go faster, magalloy, wheels for the cars of boy racers. Made a considerable - house purchase level - profit out of doing so, the profit, the value add, being the proof that the process was societally enriching. Value was being added by the process, see?

Recycling when value is being added is a great idea. Recycling that does not add value is not a great idea.

This idea that disposable vapes should be recycled is societally impoverishing. Therefore we shouldn’t do it.

Of course, no one is actually promoting this idea as a result of having gone through the numbers. Nor is the point to make society richer. It’s a combination of the pecksniffs and the puritans. The pecksniffs are horrified at the idea that anyone might enjoy themselves and the puritans want to enforce worship of the new state religion, that altar to Gaia.

Being forced to make ourselves poorer in order to accommodate the religious desires of others? The only correct response is “Gerroffoutofit”. After all, we did - finally - decide a few hundreds years back that religion, on these silver girt and sceptered isles, was a private, not public, matter.

Tim Worstall